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Coronavirus: the impact on recovering debts

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Posted by Phil Wilding on 25 March 2020

Phil Wilding
Phil Wilding Partner

As the negative impact on the global economy from the coronavirus pandemic is revealed as far more damaging than initially anticipated by commentators at the beginning of the outbreak in China, businesses face important questions about how they can recover debts in these exceptional times.

Debt recovery services remain in place

As a firm we continue to offer our debt recovery services to our clients in spite of the widespread disruption to workplaces nationwide. While we are witnessing an increased number of courts adopting telephone conferencing for hearings, at the time of writing, the court system (and, importantly, the courts’ online claim issuing systems) is functioning. Although it is important to judge how you carry out your debt recovery activities (see below) it is also important that you bear in mind that, even during these challenging times, the court system remains open for you to issue proceedings to recover the money that your business is due. Of course, the coronavirus pandemic is a rapidly evolving situation and this may be subject to change but, as a firm, our priority is to stay abreast of developments and we will issue updates accordingly.

Should I be collecting my debts at the moment?

Clearly, many businesses across a number of sectors, particularly tourism and leisure, have seen their incomes fall dramatically within a matter of days. In response, the Government has sought to intervene in the economy at a level unprecedented in the UK’s history in an attempt to limit the impact of the pandemic on businesses. Notwithstanding the Government’s intervention, it is inevitable that a number of businesses may struggle to recover. Therefore, although many businesses may genuinely struggle to repay debts for the foreseeable future, it is important that your business takes the necessary steps to protect its interests now, rather than later.

Your business may have been seeking recovery of debts informally for some time before coronavirus intervened, and you may be aware that the company, or individual, owing you money has sufficient assets to satisfy your debt. Whilst caution has to be exercised when commencing legal proceedings, key stakeholders within businesses need to ensure they are in the best position possible to recover their money once the economy has stabilised and should not be deterred from acting now to ensure their business is protected. Recovering monies due now will give you the best possible chance to weather this storm.

Importantly, businesses should bear in mind that the legal process can provide them with the opportunity to obtain forms of security (such as charging orders) that can boost their chances of recovery if debtors are liquidated in the future. Equally, if your business considers that its debtors are genuinely unable to repay their debts at the moment and, for instance, cannot honour previously agreed repayment plans, it is vital that you have the appropriate legal documentation in place to ensure that any forbearance your business offers its debtors during this stage, or any other alternative arrangement, is supported. Getting this sort of thing right now while there is a lot of uncertainty will undoubtedly prevent expensive and time-consuming litigation in the future.

Your clients may be seeking to rely on a force majeure clause to evade contractually agreed payments. Please see our advice on the topic of force majeure on the section of our website dedicated to coronavirus-related issues. Whilst coronavirus undoubtedly presents businesses with a set of unique challenges, debtors are not able to rely on a force majeure clause as a matter of right, and it is important that you seek legal advice when confronted with this challenge to your debt recovery efforts.

How we can help

Our debt recovery team will be fully operational during this difficult period and on standby to help our clients. Please contact either Phil Wilding, Gemma Baker or Kalpesh Patel to discuss any specific concerns or questions you have regarding our debt recovery processes.

About the author

Phil advises debt purchasers and has experience of collections within the banking, insurance, telecoms and public sector.

Phil Wilding

Phil advises debt purchasers and has experience of collections within the banking, insurance, telecoms and public sector.

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